Does WESCO International, Inc. (NYSE:WCC) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Hedge fund interest in WESCO International, Inc. (NYSE:WCC) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Korn Ferry (NYSE:KFY), Eldorado Gold Corp (NYSE:EGO), and Yamana Gold Inc. (NYSE:AUY) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a gander at the fresh hedge fund action regarding WESCO International, Inc. (NYSE:WCC).
How have hedgies been trading WESCO International, Inc. (NYSE:WCC)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in WCC over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Blue Harbour Group was the largest shareholder of WESCO International, Inc. (NYSE:WCC), with a stake worth $176.9 million reported as of the end of September. Trailing Blue Harbour Group was AQR Capital Management, which amassed a stake valued at $56.3 million. Polaris Capital Management, D E Shaw, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Because WESCO International, Inc. (NYSE:WCC) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds that slashed their entire stakes last quarter. Interestingly, Brian Gustavson and Andrew Haley’s 1060 Capital Management sold off the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $8.5 million in stock, and Ken Grossman and Glen Schneider’s SG Capital Management was right behind this move, as the fund sold off about $6.7 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as WESCO International, Inc. (NYSE:WCC) but similarly valued. We will take a look at Korn Ferry (NYSE:KFY), Eldorado Gold Corp (NYSE:EGO), Yamana Gold Inc. (NYSE:AUY), and NuStar Energy L.P. (NYSE:NS). This group of stocks’ market valuations match WCC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KFY | 21 | 78489 | 1 |
| EGO | 8 | 4288 | -1 |
| AUY | 19 | 78472 | 1 |
| NS | 2 | 4998 | 0 |
| Average | 12.5 | 41562 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $387 million in WCC’s case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks WESCO International, Inc. (NYSE:WCC) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on WCC, though not to the same extent, as the stock returned 16.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
